Pricey home sales hit record in Bay Area

By Steve Johnson and Pete Carey Staff writers

Posted:
07/31/2014 10:30:15 AM PDT

Updated:
07/31/2014 11:14:17 PM PDT

There was a time when a million-dollar home was something families drove by on a Sunday outing to get a glimpse of how rich folks lived. But now they're more common than Starbucks, at least around here.

Fueled by the booming tech economy and seemingly insatiable demand for housing, the Bay Area set records in the second quarter of this year in the number of homes sold for $1 million or more as well as those costing at least $2 million, a real estate information service said Thursday.

In the nine-county region, 5,734 homes sold in the April-June period for at least $1 million, representing a staggering 24.5 percent of all sales of new and existing homes and condos, according to CoreLogic DataQuick. The previous peak was 5,699 in the second quarter of 2005.

The biggest number of such sales was in Santa Clara County, which had 1,791, its largest total ever. San Francisco also set a record with 857 $1 million-plus sales.

A total of 1,117 Bay Area homes sold for at least $2 million, amounting to 4.8 percent of all sales. The previous high was 871 homes costing that much during the same period a year ago. Santa Clara County also was tops in that category with 399 sales, a county record. Other $2 million-plus sales records were recorded in Alameda, San Mateo, San Francisco, Marin and Napa counties.

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"Barring some shock to the economy, it's likely these numbers will continue to rise," said CoreLogic DataQuick analyst Andrew LePage, noting that the rapid appreciation in the value of real estate has hoisted the price of many homes past the $1 million mark. Although prices have begun to ease lately, he added, the cost of housing is still so high "it can be bad for people trying to get into the Bay Area market."

Among those experiencing that painful reality is Amy Austin-Hanson, 31, who lives in an apartment in West San Jose with her husband, James, 34, a Safeway truck driver, and their 3-year-old daughter.

"There's no way we can afford to buy a home and to make it," she said. "Worse, rent in the Bay Area has skyrocketed. My husband and I went to the bank to try to qualify to maybe buy at least a townhouse. The lady actually laughed at us." With their combined $75,000-a-year income and houses selling for $1 million, "we were told we'd never make it."

She noted that townhouses in their neighborhood are going for $600,000 to $700,000.

"The house down the street, an older tract home, is selling for $998,000," she added. "You would think, if you spend $1 million, you would be buying a mansion. These are three-bedroom tract homes."

Still, while many people can't afford a home here, there's no shortage of others snapping up houses, said Mark McLaughlin, CEO of San Francisco-based Pacific Union International, which specializes in handling luxury home transactions. He attributed the run-up in home prices to population growth, abundant jobs and the fact that the Bay Area "is one of the most desirable places to live in the world."

The housing trend is especially influenced by the sudden wealth generated by the booming tech industry. New companies going public and others lavishing their employees with stock options have created a flood of eager homebuyers driving up the price of the region's relatively limited supply of available houses.

In the $1 million-plus category, Alameda County had 777 sales in the second quarter, Contra Costa County had 714 and San Mateo County had 951. Among sales of at least $2 million, Alameda County had 79, Contra Costa County had 67 and San Mateo County had 230.

In some communities virtually all home sales were in the million-dollar category, according to CoreLogic DataQuick.

They included Atherton, Los Altos and Hillsborough, which boasted the quarter's most expensive Bay Area home purchase, $12.9 million. And in Menlo Park, no single-family homes west of U.S. 101 are for sale for less than $1 million, said Wendy McPherson, who manages Coldwell Banker's Menlo Park office. She said prices have been pushed up "by the amount of money being pumped out by Silicon Valley and the international market, especially the offshore Asian buyer."

With large cash down payments required at these high prices, even a couple making $400,000 a year between them would have trouble raising the money, she noted.

In Dublin, "you can't buy a new single-family house on a 5,000-square-foot lot for less than $1 million," said Stephen Smiley of Meyers Research, an adviser to home builders. "Affordability is going to be a major issue."

But a buyer's pain is an owner's gain.

Joan Beecher, a San Jose woman who has invested in real estate for decades, said she bought several condos and single-family homes when the market hit bottom after the housing bubble popped. She's watched her properties soar in value, selling a condo for more than twice what she paid for it.

"I can't tell you how good it's been for me," she said. "But for people who can no longer afford to buy, I feel bad for them."

Statewide, 12,826 homes sold for $1 million or more during the quarter. That was the highest for any quarter since the second quarter of 2007, when 13,681 homes sold for $1 million or more. The all-time statewide high was the third-quarter of 2005, when 15,898 California homes sold for $1 million or more.